Rents are on the decline. So Landlords, how do you protect your income?

According to the CoreLogic Rental Index, combined capital city rental rates were unchanged in May 2016. Melbourne and Hobart were the only cities to record rental rises with falls elsewhere.

While annual rents fell by -0.3%, weekly rents across the combined capital cities were unchanged in May 2016. Currently, combined capital city rental rates are $489/week for houses and $469/week for units.

Commenting in the May CoreLogic Rent Review out today, research analyst Cameron Kusher said, “It is anticipated that the weakness in the rental market will persist and where on an annual basis, we’ll see rents fall further over coming months.”

“However over the 12 months to May, we did see several capital cities experience a rise in rents. These included, Sydney at 0.9%, Melbourne 2.3%, Hobart 3.7% and Canberra 0.1%. On the flipside, falling rents pulled the combined capital average lower with a drop in Perth of -8.8% and for Darwin, -16.9%. Brisbane rents at -0.9% and Adelaide -0.9%, were also lower over the year,” Mr Kusher said.

Rental Index results as at May 31, 2016

2016-06-08--Monthly_rental_report

Median weekly rents are currently sitting at $486 across the combined capital cities. Combined capital city rental rates fell by -0.3% over the past year.

Mr Kusher said, “Since we started tracking annual rent changes back in 1996, the May 2016 results represent the lowest annual change on record.”.

With rental rates easing over the year and home values continuing to rise rental yields continue to sit at record lows of 3.3% for houses and 4.2% for units.

Gross rental yields for houses are now at record lows in Sydney, Melbourne and Canberra while unit yields are at historic lows in Sydney.

If you are a landlord, here are some tips on how to protect your rental income and ensure you don’t get stuck with a vacant property;

  1. Keep your required maintenance up to date. The more responsive you are to a tenants maintenance requests and the less problems a house has goes a long way. If you can’t afford to carry out the maintenance, that is probably a sign that you should look to sell the property.
  2. Don’t rock the boat with rent rises. If it is within reason then of course, but raising the rent can be a double-edged sword and could cause your tenant to look elsewhere. Remember that a long-term tenant (multiple years) is worth far more to your overall return that an additional $5 per week.
    Best practice in a market such as this is to listen and seek advice from your property manager, they are best equipped to make recommendations on this.
  3. Be aware of the dates your lease ends. Finalising leases over holiday periods especially the end of the year can be dangerous. Much the same if you own a property that is in the student market, you should avoid vacancies wherever possible around the end of the year.
    There is nothing wrong with requesting a specific end date for your lease. There are no laws or rules that say a lease must be only 6 or 12 months.
    My advice, if you have a property that is going to be vacant around holiday periods request that the lease be 13 months or 14 months instead of 12 so that you miss those dates where students go home overseas or people are in holiday mode.
  4. Treat your tenant well. It is well-known that tenants whom feel they are wanted stay longer. After all its your property but it’s their home.
    This advice comes with a disclaimer as not all tenants treat the property well at times but in many cases the way they receive the property sets the tone for how they will treat and ultimately leave it. No owner likes a big clean up at the end of a tenancy.
  5. Don’t put up with delinquent tenants. Although the great majority of tenants do the right thing, occasionally there are some that will fall behind on rent. This can be for many reasons but unfortunately in most cases once a tenant falls far behind they begin to avoid contact with Property Managers or owners so that they aren’t asked about money. If this is the case the issue needs to be dealt with swiftly and in the right manner to ensure an owners risk is limited.

    If you are a tenant and reading this, the best thing you can do should you fall behind in rent is communicate with the Property Manager. in many cases there can be payment plan options worked out till you catch up. Sticking your head in the sand will only compound an issue.

  6. Landlord insurance is a must. Period. It’s inexpensive and covers many losses.
  7. Get a Tax Depreciation Schedule. This allows you to deduct the depreciating cost of items in a rental property such as appliances. This is then used to reduce your taxable income.
  8. Is it time to sell? if you are an owner and unprepared for the costs or drops in market maybe it is time to take the capital out of your property and look at other investments. The sale market is experiencing growth so it is a good time to exit if that it your strategy.

    If you require further details on any of the above, feel free to contact us at rentals@leadestateagents.com.au or call the office  08 8271 3666.

DR

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